Citizens Property Insurance legal bills soar past $100M

TALLAHASSEE -- Citizens Property Insurance spent $100 million in the past two years in legal fees and says its legal bills are rising because a handful of aggressive South Florida law firms — most in Miami-Dade County — have targeted the insurance giant with water-damage claims in a hurricane-free year.

According to a report the insurer released Monday, while Miami-Dade residents have 19 percent of all Citizens policies in force, the county “accounts for 33 percent of all reported claims and 60 percent of all litigated claims statewide,” with the bulk of those claims coming from water-damage losses.

In addition, 84 percent of all claims in the past five years have originated in Miami-Dade, Broward and Palm Beach counties, the report said. Ten law firms are responsible for 50 percent of the lawsuits against the company and 60 percent of those suits come from Miami-Dade.“Claims are increasing because Citizens is a target,’’ Barry Gilway, CEO of Citizens, said in an interview last week.

The report serves as a counterpoint to legislators and law firms who have accused the company of using delay tactics as its principal legal strategy in an effort to make the state-run insurer appear to be more profitable.

Be the first to know.

No one covers what is happening in our community better than we do. And with a digital subscription, you'll never miss a local story.

Those lawyers say Florida policyholders are paying millions in unnecessary legal expenses because of Citizens’ practice of refusing to pay many claims without a lawsuit.

“I love it when insurers treat their insureds like they are asking for ‘handouts’ when they file claims,’’ said Ted Corless, a Tampa attorney who won a $15 million judgment against Citizens last week. “If they get claims that are owed, pay them, and you won’t be a target.”

The 44-page report, a litigation analysis, found that Citizens spent $64 million in defense fees in 2012 and has already spent $46 million on defense lawyers and fees this year. By contrast, the company spent at least $16 million between January 2011 and June 2013 on legal fees paid out to plaintiffs’ lawyers — those representing policyholders who won their cases, according to a public records request of the company.

The report does not say how much the company could have saved had it paid its claims rather than waiting until it was sued. It does not analyze how many lawsuits are pending and what the potential cost of those claims, plus legal costs, might be.

But rather than focus on the cost of the company’s legal strategy, the Citizens report instead depicted how aggressive lawyers, mostly from Miami, have filed numerous lawsuits in the last couple of years against the company.

Several lawyers involved in the claims have told the Herald/Times that the lawsuits were filed because Citizen’s failed to pay for water damage from leaking or broken pipes, forcing homeowners to take them to court.

“Do I think there are aggressive attorneys litigating against Citizens? Yes,’’ said state Rep. Carlos Trujillo, a Miami Republican whose law firm is one of the top 10 companies responsible for the rise in litigation against Citizens. “But it’s also their hard-line tactics. If it’s a water claim, it’s denied. They’ll win some and lose some but when you spend $60,000 in attorneys fees litigating a $20,000 claim, it’s not the wisest use of resources.”

The report shows that, since 2009, 23,510 lawsuits were filed against the company and, since 2010, only 42 of those cases have made it to trial.

Of the small fraction of cases that made it to trial, Citizens won 59 percent. Of the cases in which the court ruled in favor of the policyholders, 10 percent were for amounts less than what the policyholder wanted.

The analysis does not take into account the number of cases Citizens agreed to settle after years of litigation.

Citizen’s General Counsel Dan Sumner said the goal of the report was not to determine the cause of the spike in lawsuits but to provide a comprehensive look at the trends.

Citizens lost one of the biggest cases in its history last week — a $15 million award for a 2008 sinkhole claim filed by Windtree Apartments in Tampa. Documents show that Citizens could be responsible for more than $800,000 in legal fees because the company spent so much time fighting the case.

The main focus of Citizens’ litigation analysis is to highlight what the company perceives is a growing threat from Miami-based law firms against the company. “We want to pay every dime that we owe and we want to pay it as rapidly as we can,” Gilway said last week.

“That’s the fundamental premise that we operate under. However, we should not pay any more than what we owe.”

But lawyers representing many policyholders say that Citizens has cut its claims staff, tells policyholders a claim is covered and then ignores a claim for months or years and, when they get sued, denies liability.

“If you have 40 percent of the market, and you cut your claims staff and tell lawyers to spend years to defend payment to claims, you are going to get sued — a lot, and it’s your fault,” Corless said, noting that Citizens frequently switches law firms in the middle of a case, further delaying it, as lawyers rack up attorneys fees before claims are paid.

Gilway said the company is working to change the way it handles its litigation and is focusing on improving the quality of its defense counsel and accelerating resolutions.

“There were performance issues on the part of defense counsel,’’ Gilway said. “They weren’t getting adequately prepared for trial. If they weren’t applying a consistent standard, a Citizens standard, for claims management, then that was an issue. It was a significant issue.”

The report does not provide any details on the number of cases settled versus those that went to trial.